Italy’s economy is showing signs of recovery, but the future still does not look so bright according to the BankItalia’s Governor. The latest macroeconomic data from Eurostat demonstrates an improvement in the level of unemployment in the Eurozone. Lastly, some exciting news for the Chinese currency from the IMF.
The Governor of Italy’s central bank, Ignazio Visco, said during a conference in Bologna that the economy of the country is on the right track to recovery. The economy has been growing, although slowly, and the GDP growth for 2015 is expected to be 0.9%. However, this does not mean that its cyclical problems are over. One of the main issues remains the high level of public debt which has reached a record level of 133% of the GDP. According to the Governor, Italy has failed in adapting to globalization and technological progress and this has led to a decrease in international competitiveness. Instead of focusing on increasing foreign investment, the government has relied on cutting costs by depending on cheap imports from China.
It is worth mentioning that the best performing region of the peninsula is Lombardy. The internal GDP growth for 2015 is anticipated to be around 1%, thus surpassing the national average. The rise in investments, employment and consumption is also partly due to Expo 2015 taking place in Milan. Another sector that has seen good numbers in this region has been tourism, which grew in the first half of 2015 by 4.9% compared to the same period one year ago. A senior executive of Italy’s Central Bank called Lombardy “the locomotive of the nation”. It remains to be seen whether the boost from Expo was a temporary one or the growth is there to last.
Eurostat — Eurozone’s official statistics office — has released macroeconomic data regarding the month of October. Unemployment has decreased again reaching 10.7%, the lowest levels since January 2012. There were 17.241 million unemployed during October, 13 thousand less than the preceding month. The country with the lowest levels remains Germany with 4.5%, while the highest unemployment levels re seen in Greece and Spain, with 24.6% and 21.6% respectively. This improvement is still very weak though, a further proof that the Eurozone is in need of further stimulus from the ECB.
While waiting for a further monetary expansion, the Stoxx Europe 600 jumped to a three month high this Monday. The November gain for the European Index is 2.7%, while the rebound from the September low is 14%. Markets have been excited about the prospect of more quantitative easing for quite some time now. The excitement has been intense and more than enough to offset any panic or uncertainty caused by the recent geopolitical turbulence.
The International Monetary Fund at its executive meeting in Washington decided to grant China’s yuan the status of a reserve currency in the IMF’s Special Drawing Rights (SDR) basket. As it is stated on the fund’s official webpage, the SDR is an international reserve asset created in 1969 to supplement its member countries’ official reserves. In other words, it is not a currency, but a potential claim on the freely usable currencies of IMF members. Its value is based on the value of the four currencies: the US dollar, the Euro, the Japanese yen and the British pound. Effective October 1st 2016, the Chinese yuan will also be added to this elite group of the World’s main currencies. This is important for China because it reaffirms its increasing role on the global economic arena.